He will not say so in words, nor will the media dare report it, but the president’s budget slams the door hard on the belief that the Keynesian stimulus would save the economy. When I say hard, I mean permanently:
In 2009, Obama economists predicted the unemployment rate — if Congress passed the $800 billion stimulus — would decline to 5% by mid-2013. But in its new budget, the Obama White House doesn’t see the unemployment rate declining below 5.4% by 2023.
I’ve written about that prediction numerous times, updating it infrequently under the subject heading “Graphing colossal economic folly.” It is a hard lesson to teach when grown men and women wish so desperately believe that observable “demigods” in government are smarter and wiser in directing the national economy as if it were a giant automobile with known steering, gas, and brakes, rather than the cumulative effects of millions upon millions of unseen decisions made by private individuals and entrepreneurs responding to their own best interests as freely as they can.
As my colleague Dr. Roy Cordato put it, “Government bureaucrats cannot improve on the decisions of free individuals about how to invest and spend their own money. This is the reason why the allocation of resources through the processes of the free enterprise system has always generated more job creation, more economic growth, and more personal and social wealth than any other mechanism ever devised.”
What happens when a would-be God of All Things usurps those decisions and directs those resources himself is that the economy grinds to a crawl, and no amount of sincerity of belief in the G.O.A.T.’s omniscience can change the basic fundamentals of economics.
That is why a stimulus plan that was guaranteed by the incoming Obama administration to hold unemployment below 8 percent at its worst and bring it down to 5 percent by the third quarter of this year failed on both counts: it contributed to unemployment rising above 10 percent, and it doesn’t see it falling to five percent even ten years from now, let alone this year.
And the story is even worse than that. The unemployment rate is based on those who are in the job market; i.e., the labor force participation rate. Which has fallen to its lowest levels since the days the Carter malaise. If the labor force participation rate remained where it was in 2009, when the stimulus was passed, the unemployment rate would be nearing 11 percent.